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Slow Down In Chinese Growth

James Boston
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Slow Down In Chinese Growth

Growth has decelerated again in what is now officially the world’s largest economy. The third quarter Gross Domestic Product (GDP) number out of China is still enviable by western economy standards but has fallen back slightly as the gradual downward trend continues. GDP for Q3 has been announced as 7.3% year on year compared to the 7.5% measurement in the previous quarter, this did however beat the consensus estimate for a figure of 7.2%. The quarter on quarter growth has been recorded as 1.9%, this represents a moderate fall from the Q2 figure of 2.0% but again beats the market consensus estimate for a reading closer to 1.8%.

Having posted the slowest pace of GDP growth since 2009, China now looks set to miss it’s official growth target of 7.5% this year, this would be the first time in over 15 years that this economy missed such a target. Officials in China are naturally playing down the prospect of a short fall in growth with the rhetoric that the 7.5% is just an estimate and anything in the region of this level would be acceptable. This is relevant because the authorities in Beijing normally present a lot of pride and confidence in relation to meeting growth estimates and have in the past stimulated short bursts of activity late in the year to ensure that the target is always met.

The latest comments about a potential shortfall may just be a couching exercise designed to save face should Q4 growth not make up the shortfall. It can however also be interpreted that Chinese authorities have calculated that on this occasion they may not have the means to create a stimulus burst in the last quarter. Recent weakening in both the domestic consumer market and manufacturing sector make it very likely that the latter situation is the case.

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